September 8, 2026
Dear Leland and Everett,
Today I want to talk about China.
It’s hard to overstate how much China has changed over the course of my lifetime. When I was born, China was astonishingly poor and mostly isolated from the world. Chinese and American citizens had very little to do with each other. Now, America and China have become both economically intertwined but also geopolitical rivals to the degree some wonder whether the two nations entered a Thucydides trap, such that China’s ascendency sufficiently threatens American hegemony to provoke war between the two nations. My understanding is that China openly promotes a theory that America (and the West more broadly) are in decline while China is on the rise. This idea seems to be taking hold, explicitly and implicitly, in the American psyche: Americans are at something of a nadir in terms of self belief and confidence, and seem to find Chinese confidence inspiring. It doesn’t hurt that the Chinese government’s communist roots lend credibility to the idea that Marxism is not only ascendant, but the attractive and inevitable future. The idea that China is proof Marxism works is bunk, but it’s an idea that appears to be gaining steam in the zeitgeist.
Americans used to credit Nixon with “opening up China”, which almost certainly overstates American influence and understates Chinese agency. China was almost certainly ready to move past famine and poverty and the chaos of the Cultural Revolution, looking for a way to grow the economy in order to support their people. Eventually, China landed on a hybrid model, creating economic zones governed by different laws than the rest of the country. These economic zones were, by Chinese standards anyway, surprisingly laissez-faire, allowing the companies operating within these zones relative freedom to make the decisions necessary to compete in the global economy.
Prior to the establishment of these economic zones, behemoth “state owned enterprises” (SOEs) dominated the Chinese economy. These SOEs were owned by the government and run by party operatives. They were wildly inefficient and ineffective. The SOEs remain in operation and still dominate some sectors, but their impact on the economy shrunk. The companies operating in free trade zones, conversely, became proof of concept for other types of economic liberalization, which became the primary economic driver and a transformational economic engine in the country.
The economic zones started modestly enough. But as the world globalized and international trade volumes exploded, China’s vast population of poor potential workers attracted investment. American companies, to take just one example, could close local manufacturing plants and move sourcing to China, where labor was multiple times cheaper and environmental and labor laws more relaxed. Eventually American companies learned they could purchase products from outsourced manufacturers without employing the factory workers needed to build those products. American companies were able to shrink the size of their workforces (and the associated risks and complexities) as well as the size of their balance sheets, shifting huge amounts of capital to Chinese companies; shifting these assets to Chinese manufacturers made American companies seem more impressive, particularly when analysts measured profits relative to assets in attempts to quantify capital efficiency.
These Chinese factories, borrowing learnings from Taiwanese forebears, learned how to pool production capabilities. At one point in time I worked with a Chinese factory who built computers on behalf of my company. So far as I can tell the factory cross trained workers such that they could build computers for one brand one day and another brand the next. As a result, the entire supply chain became more efficient, with the Chinese factories able to minimize the amount of time labor and capital sat idle precisely because they were able to use one factory and labor force to build products for multiple brands.
American companies leaned into these trends, but so did the American government. America even supported China’s entry into the World Trade Organization, a group that attempts to ensure all participants played by a shared, agreed-upon set of rules when it comes to global trade. Our thesis (or at least the thesis sold to the American public) was that helping China become wealthy would encourage the country to democratize; I genuinely thought China would become freer as it became wealthier.
For a long time, things seemed to be working. The more China participated in the global economy, the richer the country became. The richer the country became, the more the citizens appeared to demand freedoms at home. And the government appeared, albeit slowly and reluctantly, to be letting go of control of more and more aspects of Chinese life. As far as I could tell, China really did seem on the way to becoming a rich, successful, democratic nation. What I missed: while China liberated economically, the CCP retained an iron grip on political control. Personally, I genuinely thought growing wealth and income would force China to liberate politically; so far I have been gravely mistaken.
I travelled to China a lot between 2008-2015. Particularly in the later years, it’s hard to overstate the buzz I felt when visiting. People clearly felt a sense of pride, energy, enthusiasm, and optimism for the future. My sense was that people were proud of how far the country had come, and felt a real sense of optimism and bullishness about where the country was headed. Just a generation or two removed from abject poverty, young Chinese people were beginning to consume conspicuously, flaunting wealth and status wherever possible. Those were heady times in China, and probably even a little manic.
I won’t pretend to know China well enough to know precisely where things went wrong. In fact, for the most part, I suspect the problem lay with my own expectations more than Chinese actions. So perhaps a more relevant question would be how I came to awareness the thesis of liberalization was playing out differently than I anticipated. Donald Trump’s antagonism toward China in his first term accelerated my awareness that not all was well in America’s relations with China. Trump blamed America’s trade with China on the demise of the American working class. Trump’s accusations held some merit: competition with Chinese manufacturing absolutely hurt working class wages in America. But China wasn’t alone at fault: America and American companies cheered these developments all along, and I along with them. To be clear, China engaged in unfair practices. Chinese companies, or other operatives, were notorious for stealing American trade secrets. While welcoming export-driven manufacturing, China restricted access to local markets: through tariffs, licenses, ownership limits, and informal barriers. The Chinese government continued to subsidize or protect Chinese companies from international competition in ways that pretty blatantly violated WTO rules, but suffered few penalties for doing so; at the very least, the WTO proved too slow adjudicating unfair trade practices. But all of these things had long been understood, so in many ways Trump’s behavior seemed odd, given the degree to which America had either been tacitly complicit or explicitly supportive to date.
China’s response to Trump’s antagonism surprised me, and seemed to awaken Americans to a geopolitical rivalry I – and I think much of the American public – didn’t previously realize existed, or at least whose existence we hadn’t yet internalized. Looking back, I realized China demonstrated they had no intention of continued political liberalization. Later China even started rolling back some of the economic freedoms I assumed would eventually lead to political freedom. Xi began to bring Chinese companies increasingly under state control (or at least state guardrails and influence). The ruling Chinese Communist Party (CCP) seems insistent on remaining in firm control over not just the political future, but also the economic future of the nation.
Increasing geopolitical tension between American and China over the last decade brings us to a point where America and China appear to be offering the world two competing visions for the future. China’s vision is more clearly articulated: a world led by China instead of – per their telling – dominated by America. American confidence is so low that the competing vision isn’t particularly well articulated these days. In fact, I think there are competing American visions, one perhaps better articulated than the other. The older American vision relates to an earlier letter on secular nirvana, and basically argues that the world should continue integrating until all nations are democratic and find frameworks to work together peacefully in perpetuity (with America playing the lead role). As more of us realize the fundamental flaws in the old vision, we’re in the process of articulating a new vision. Personally, I’m not prepared to lay it out with any precision. As a guiding principle, I believe we are headed toward a world of more freedom, not less, and so any proposals that limit human freedoms should be viewed with skepticism. Relatedly, I suspect we’re headed toward a world where more decisions will be made locally, in contrast to most of the last century, where decisions increasingly got made nationally or internationally. Nations are likely to survive, at least for awhile, but with less power than they’ve known recently. I anticipate we’ll unlock more human creativity and, in the process, unshackle ourselves from some of the chains that have limited or even controlled our actions over the last few decades.
With this in mind, I think those who are bullish on China and bearish on America are being shortsighted and cynical. Of course, our egos love the idea that a totalitarian nation might be right after all, and that we will all eventually live under totalitarian rule. Of course, they might be right. But our egos fail, time and again, to understand one of the core things that makes America great: America’s ability to unleash our citizenry on a problem without much in the way of overarching control or direction might seem chaotic, but is a source of far more strength than weakness. America’s capacity for reinvention and renewal is unrivaled, and I submit we’re going through our latest period of reinvention and renewal. To the extent America is willing to resist our own totalitarian instincts and lean into the freedoms that made us great, I find it inevitable we will find our way around whatever problems China poses toward our future capacity to live free, thriving, meaningful lives. My sincere hope is that China comes along for the ride. As of now I’m not optimistic, but if we are wise we will offer plenty of chances to change course.
I love you both.
Love,
Dad
Letters to Leland 